Bank deposits outshine credit by Rs 1 lakh cr in May

May deposits at Rs 2.7 lakh cr as against credit offtake of Rs 1.7 lakh cr
Bank deposits outshine credit by Rs 1 lakh cr in May

MUMBAI: Banks’ continuous efforts to mobilise deposits are finally bearing fruit with the funds mobilsed during the last fortnight of May overshooting the loans provided to customers in absolute terms. Deposits totalled at Rs 2.7 trillion (Rs 2.7 lakh cr) as against credit offtake totalling at Rs 1.7 trillion, something that has been the opposite in over two years.

Banks have been chasing deposits with attractive pricing as the people were parking their money in stocks and mutual funds which have been offering more returns. Leading banks have increased their deposit pricing many times in the past a few quarters as there were more demand for credit.

However in percentage growth terms, credit expansion is higher by 19.8% year-on-year (YoY) to reach Rs 167.8 trillion for the fortnight ending May 31, 2024. In absolute terms, credit expanded by Rs 27.7 trillion during the past 12 months to reach Rs 167.8 trillion as of May 31, while deposits grew by 12.8% YoY for the fortnight or by Rs 25.1 trillion over the last 12 months to reach Rs 210.9 trillion.

However for the fortnight to May 31, in absolute terms, deposit expanded by Rs 2.7 trillion as against credit expansion of Rs 1.7 trillion, according to the RBI data collated by Care Ratings. While sequentially credit expansion was up only by 1%, deposits increase has been by 1.3% in the reporting fortnight, said Sanjay Agarwal, a senior director with the agency.

This has had the credit-to-deposit ratio, which has been hovering around 80 since September 2023, has declined marginally or by 20 bps to 79.6 for the fortnight ending May 31.

Deposit growth, though showing improvement, has lagged credit growth in the past year. It is expected to be prominent in FY25 as banks intensify efforts to strengthen their liability franchise. This focus aims to prevent constraints on credit uptake due to deposit growth, the agency said, adding deposit growth is likely to range between 13 and 13.5 percent in FY25.

Meanwhile, government investment to total assets ratio declined by 23 bps to 25.4 and overall government investments stood at Rs 61.8 trillion as of May 31, reporting a growth of 10.3 percent on-year, and declined by 0.3 percent sequentially.

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